Sunday, October 18, 2015

Repaying a mortgage loan of $750,000


A new 5 room BTO flat in Tiong Bahru sells for $750,000.

Here are the figures on the monthly repayment over 99 years and 30 years at 4% and 2.6% interest.

Loan Yrs Int Annual Monthly
750000 99 4.00% $30,631 $2,553
750000 30 4.00% $43,373 $3,614
750000 30 2.60% $36,313 $3,026

If the buyer borrows $750,000 and repay over 30 years at 2.6%, the monthly repayment is $3,026. If interest rate increases to 4% (which is likely to happen within a few years), the monthly repayment increased to $3,600.

I have given the monthly repayment for a 99 year loan for comparison only. No bank will grant a loan for such a period. You will see that the repayment drops by only 30% even through the repayment period increased by more than 3 times, i.e. from 30 years to 99 years.

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